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I would like some solid advice at starting up my web design/hosting/promoting company. So far I have one client that I'm working with and i'm kind of flying by the seat of my pants.
I would like info concerning proposals, procedures, etc.

For instance, how should i go about getting the design ideas from the client?
Right now i'm simply sketching some things in fireworks and submitting them and then changing a few things. After they approve a design I will then write up a contract and start the site.
Is this the best methodology?

The steps that i'm taking are:
1. consulting
2. proposal
3. submitting composites
4. work out architecture
5. spit out site
6. find hosting company
7. maintain a relationship with client for possible future work

You need that contract after they accept your proposal and before you do any work.

Make sure that you define everything in the contract including severence fees and how the balance is to be paid.

For most contract work you will want a deposit up front, then equal payments over the life of the contract. Include such things as expenses and any other associated costs. Sometimes I charge $5.00 plus $.50 a mile every time they make me come into their office plus an hourly rate from my door to my door. Other times this cost is incorporated in my hourly fees which start at $25 and go up from there This is good for open ended projects.
Or you might charge on a per project basis. I do this if it looks like the customer is more likely to buy that way or just want one specific problem solved. Usually they get the better end of the bargain but I also use a slightly higher hourly fee for estimates ($40 and up) depending on the work. Of course this also covers expenses and other unforeseen costs so my costs could be higher then anticipated. I also place a clause in the contract that if x number of changes are made then the contract will revert to an hourly rate for the remainder of the project. This makes customers think through their changes before calling on the phone. It also makes the project easier to manage.

To set your prices you estimate your costs and overhead and add that to the reasonable salary you wish to earn. You would then divide this number by 2000 (the average # of hours worked by an average american in a year). The resulting number is how much you should charge for hourly work. If you charged $25 per hour you would make $50,000 if you worked only 2000 billable hours in a year. I like to try and keep my salary between $50K and $80K a year. Hence the $25 and $40 starting hourly rates above.

AS for proposals remember that your now in the advertising business. Not matter whatever else happens the number one thing on the internet is advertising. Your advertising a good or service. Even free sites like Webmaster Resources has to advertise itself to succeed, part of that advertising is the site itself. TO sell your proposal draw up a mock site on storyboard and show that to the customers. Give them addresses of sites you have worked on before and/or make up demonstration sites for your portfolio.

I had an experience with a client once regarding payment, I would like to share with you. They wanted me to make a huge site for them. They had no idea how much it would cost. When I presented them with the proposal they just about fell off their chair. I was afraid to lose this client so I quickly repaired the damage. I asked them again what they thought it would cost. It was 1/10 of what I proposed. So I sat down and negotiated with them for what I could create for that dollar amount. They were happy campers- whew!!

If I could do it again, I would get an idea what their budget is before hand. Even if they don't know, get them to give you some idea. I didn't pursue this well now that I look back on this.
Many people don't have a clue what goes into web design and marketing. You don't want to scare them off, instead you want to work within their budget, and then, later, you can add to their site.
Every time a send off a bill, I always send a letter telling them nice things about their site that they had added , and then let them know what other wonderful things I can do for them. So far it has kept a steady stream of business for me.

I gave my first client this same treatment, they got their website at a great deal (steal), but what happened is that I received a huge client based on their referral. I haven't even made my company website yet since I have been getting business word of mouth and am very very busy. So work within your clients means, spread out the work a bit if you have to, and don't forget customer service!!